Impact of information exchange on supplier forecasting performance

Impact of information exchange on supplier forecasting performance

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Article ID: iaor20123120
Volume: 40
Issue: 6
Start Page Number: 738
End Page Number: 747
Publication Date: Dec 2012
Journal: Omega
Authors: , ,
Keywords: forecasting: applications, demand, supply & supply chains, retailing
Abstract:

Forecasts of demand are crucial to drive supply chains and enterprise resource planning systems. Usually, well‐known univariate methods that work automatically such as exponential smoothing are employed to accomplish such forecasts. The traditional Supply Chain relies on a decentralized system where each member feeds its own Forecasting Support System (FSS) with incoming orders from direct customers. Nevertheless, other collaboration schemes are also possible, for instance, the Information Exchange framework allows demand information to be shared between the supplier and the retailer. Current theoretical models have shown the limited circumstances where retailer information is valuable to the supplier. However, there has been very little empirical work carried out. Considering a serially linked two‐level supply chain, this work assesses the role of sharing market sales information obtained by the retailer on the supplier forecasting accuracy. Weekly data from a manufacturer and a major UK grocery retailer have been analyzed to show the circumstances where information sharing leads to improved forecasting accuracy. Without resorting to unrealistic assumptions, we find significant evidence of benefits through information sharing with substantial improvements in forecast accuracy.

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